3 minsOctober 28, 2016
Its 9.30 pm in the night. There are 12 missed calls on her mobile from home. Reena is still searching for tax-saving tips online on the office computer. The mad rush for saving taxes is in full swing as the financial year end i.e. March 31 approaches
like a speeding freight train. If you have been lazy, your employer would have given you the bad news that tax deduction at source (TDS) from your salary will be bigger. Don’t worry. Even if you didn’t plan taxes, here are a few
- Money invested in tax saved:
- First check if you have used all the tax saving investments under Section 80C.
- You can invest up to Rs 1.5 lakh in a financial year and save over Rs 40,000 on taxes alone if you fall in the highest income-tax slab.
- There are many options like PPF or public provident fund (15 years lock-in), equity linked saving scheme (3 years lock-in),
national saving certificate or NSC and tax saving bank deposit (both have 5 year lock-in).
- If you are extremely traditional, you can also invest up to Rs 1.5 lakh in employee provident fund (EPF). Like ELSS and PPF, the EPF amount at maturity is tax free.
- In case of NSC and tax-saving FD, interest is taxable. If you have a girl child, you can save tax by opening a Sukanya Samriddhi Yojana
account where the maturity proceeds are not taxed.
- Beyond section 80C:
- If you have extinguished the section 80C limit, no need to worry.
- The NPS or National Pension System can help you save tax over and above the 80C window. Your contribution in the scheme is
deducted from income tax up to a maximum of Rs.50,000.
37-year old Jatin had exhausted the Rs 1.5 lakh savings limit in Section 80C. When he found out about additional NPS sops, it took him less than a week to use the window.
- Medical insurance is also an area where you can save tax. This is not an unnecessary expense even if you have employer insurance. Ask Paramjit who was left without any medical cover when he changed his job. The transition period was
not covered by Paramjit’s previous employer nor his new company. Section 80D allows him to get an individual cover and save taxes, individuals can save up to Rs 60,000 deduction if they take care of the sub-limits.
- Lastly, if you are a self-employed person paying rent or a salaried employee who does not get House Rental Allowance (HRA), then under section 80GG you can claim the lowest among 25% of the total income, Rs 2000 per month or excess
of rent paid over 10% of total income. Do note you can take advantage only if you, your spouse or child does not own any residential accommodation in India or abroad.
- Tax gains from share losses:
- This is a smart way to lower taxes if you dabble in direct share market investments. If you have held a loss-making share investment for less than 12 months from the date of buying, then the resulting loss on its transaction on stock
exchanges is termed as short-term capital loss. Jeetu uses this route every year and saves taxes. This is because Jeetu knows the loss can be adjusted against either the short-term capital gain, or long-term capital gain in effect
cutting tax outgo. If the short-term loss cannot be set off in the same fiscal, then the balance can be carried forward to subsequent eight years.
- Real saving from paper bills:
- Some personal expenses can also be used to claim exemptions. These expenses are to be deducted from your gross salary. Your employer may give you part of your salary as medical allowance. Aditi checked with the HR department at her
company who told her that she can save taxes if actual bills of medical expenses are produced. Yes, if you give original bills, this allowance becomes tax-free. So, start collecting medical bills and save up to Rs 15,000 in a financial
year by giving receipts of medical expense.
Another over-looked area in leave travel allowance. This is tax-free for domestic travel when you are on official leave, and can be claimed two times in a full year block. The maximum for AC-I of train journey and economy class of air travel can
[Also Read: Latest Income Tax Slabs for 2020-21]
If you have given money for charity, you can claim that as well. You can save tax on your donations to eligible institutions. Donations to scientific institutions and religious bodies can also help you claim tax rebate.
To know how to be an expert tax-saver, click here.